How investigators unravelled Europe's biggest-ever fake-medicine scam

When counterfeit schizophrenia drugs were found by a British importer, the trail led from France to China. Here's how investigators unravelled Europe's biggest-ever fake-medicine scam.

Steve Gallagher

This article was taken from the December 2011 issue of Wired
magazine. Be the first to read Wired's articles in print before
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Kevin Xu, 35, was waiting nervously at Starbucks in Bangkok's
busy Suvarnabhumi Airport when the American arrived, fresh off his
flight from Houston. Xu, a Chinese national from Shenzhen, began to
get up from his chair but the American had already seen him, and
the two men shook hands while Xu's wife, who had travelled to
Thailand with him, ventured a small, tight smile.

"I'm happy we could meet with each other," Xu said, one hand
rising to check the knot of his tie. Both men were smartly dressed
as they sat among the transiting travellers. For Xu and his wife,
the meeting in July 2007 had the potential to be life-changing --
though not, as it would turn out, in quite the way either of them
had envisaged. After years of working to expand their
pharmaceutical business, Pacific Orient International, in mainland
China, they were finally poised to break into the world's biggest
and most lucrative market for prescription medicines: the United
States. But to crack that market they needed help -- help that this
relaxed, suntanned man seemed willing to provide.

"It's a great opportunity for both of us," the American said,
noting Xu's wife's Swiss watch. Unruffled by his 19-hour flight
from Texas, the American's deep voice and firm handshake appeared
to be designed to put an anxious business partner at ease.

"So what are your biggest products right now?" the American
asked, coming straight to the point. Xu glanced at his wife before
answering, his English heavily accented and slightly hesitant.
"Casodex," he replied. "Uh... Casodex and Plavix. They in your
market in the USA?"

Plavix and Casodex are prescription drugs used to treat heart
disease and prostate cancer, respectively. Plavix is licensed by
drugs giant Bristol-Myers
Squibb and Casodex by AstraZeneca. Plavix
retails for around £142 a pack of 30 tablets and Casodex for
anything up to £240. But Xu wasn't sourcing his drugs from
authorised wholesalers -- his iteration was being manufactured
illegally in China.

"Right, yes, United States," replied the American. "And I have
some customers that I think I can do volume sales on."

Xu could hardly believe his luck. In his relentless drive to
expand his high-margin business -- counterfeiters' profits are often enormous because they haven't
had to fund the R&D work undertaken by the pharma companies --
he had already found a way into the European market. But until now,
the US had been hard to penetrate. Here, finally, was his
chance.

After successfully counterfeiting "lifestyle" drugs such as Viagra and Cialis, Xu had branched out into even more
profitable life-saving medications, such as Plavix and Casodex, as
well as Tamiflu for avian flu, which brought in profits more than 500 per cent
higher than Viagra. These were just three of 29 different fake
drugs that Xu told the American he could supply for the US, with
the American taking a cut.

Like many counterfeiters--- a 2005 report from the Organisation
for Economic Cooperation and Development estimated that the
fake-medicine trade is worth $200 billion (£130 billion), two cents
in every dollar of global exports -- Xu had gone undetected for a
long time. His counterfeit medication was shipped from China to
Europe. By sending the patient-information leaflets separately from
the drug packets and the tablets themselves, and from different
destinations, he was making it nearly impossible for the
authorities to track him down.

But not completely impossible. What Xu didn't know was that the
US department of Immigration Customs Enforcement (ICE) had been
tipped off by the pharmaceutical giant Eli Lilly. Xu's was the
biggest and most sophisticated such crime that ICE had yet come
across. Law-enforcement officials don't know exactly how much money
the counterfeiter was making, but estimated it to be in the
"millions of dollars". Nevertheless, the true extent of Xu's
distribution network was still unknown.

The coffee shop was noisy, but Xu was intently focused on the
American as he ordered eight shipments of Plavix, Casodex, Tamiflu
and Aricept, a drug for Alzheimer's disease. Xu was excited; his
deep-set features relaxed a little. This meeting was going better
than he ever imagined. He could, potentially, be making millions of
dollars within weeks. He did not know that the quiet American was
actually a special agent from ICE, and that some of his colleagues
were busy videoing the entire exchange.

Comments

you are doing some amazing and interesting articles, i will be looking forward to the next one.

Mark Newland

Dec 1st 2011

Great article.

TT

Dec 6th 2011

I automatically read Mick Deats as Dick Meats. *shakes head*

toledo mcpherson

Dec 8th 2011

Congratulations to excellent investigative teams - UK MHRA and US ICE. A study should be done to determine the physical impact on the many patients in the UK who got these unsafe medicines since too often we never learn of their suffering.

Tom Kubic

Dec 19th 2011

Congratulations to excellent investigative teams - UK MHRA and US ICE. A study should be done to determine the physical impact on the many patients in the UK who got these unsafe medicines since too often we never learn of their suffering.

Tom Kubic

Dec 19th 2011

Congratulations to excellent investigative teams - UK MHRA and US ICE. A study should be done to determine the physical impact on the many patients in the UK who got these unsafe medicines since too often we never learn of their suffering.